SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
AMENDMENT NO. 1
(Mark one)
(X) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2002
OR
( ) TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT FOR THE
TRANSITION PERIOD FROM TO
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Commission file number 0-439
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AMERICAN LOCKER GROUP INCORPORATED
----------------------------------
(Exact name of business issuer as specified in its charter)
DELAWARE 16-0338330
- --------------------------------------------- ----------------------------
(State or other jurisdiction of incorporation (IRS Employer Identification
or organization Number)
608 ALLEN STREET, JAMESTOWN, NY 14701
-------------------------------------
(Address of principal executive offices)
(716) 664-9600
--------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements. Yes X No ----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No Not Applicable ----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding
of each of the issuer's class of common stock equity as
of the latest practicable date: July 25, 2002.
Common Stock $1.00 par value - 1,992,146
Transitional Small Business Disclosure (check one) Yes No X
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1
EXPLANATORY NOTE
This Amendment No. 1 to the Quarterly Report on Form 10-Q/A amends the
Quarterly Report on Form 10-Q of American Locker Group Incorporated (the
"Company") for the quarterly period ended June 30, 2002, as filed with the
Securities and Exchange Commission on August 2, 2002, to include the
certification of the Chief Executive Officer and Principal Accounting Officer of
the Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
American Locker Group Incorporated and Subsidiaries
Consolidated Balance Sheets
JUNE 30, December 31,
2002 2001
---- ----
ASSETS
Current assets:
Cash and cash equivalents $ 4,622,250 $ 4,579,034
Accounts and notes receivable, less allowance
for doubtful accounts of $255,000 in 2002
and $249,000 in 2001 5,314,499 5,042,685
Inventories 6,204,507 6,813,511
Prepaid expenses 204,818 125,805
Prepaid income taxes 173,489 -
Deferred income taxes 570,731 570,731
--------------- --------------
Total current assets 17,090,294 17,131,766
Property, plant and equipment:
Land 500,500 500,500
Buildings 3,447,899 3,441,616
Machinery and equipment 11,925,990 11,771,099
--------------- ---------------
15,874,389 15,713,215
Less allowance for depreciation (10,378,814) (9,879,825)
--------------- ---------------
5,495,575 5,833,390
Goodwill 6,155,204 6,405,204
Deferred income taxes - 73,393
Other assets 233,333 291,667
--------------- ---------------
Total assets $28,974,406 $ 29,735,420
=============== ===============
2
American Locker Group Incorporated and Subsidiaries
Consolidated Balance Sheets
JUNE 30, December 31,
2002 2001
---- ----
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,481,341 $ 1,348,396
Commissions, salaries, wages and taxes thereon 235,191 555,326
Other accrued expenses 615,298 895,274
Federal, state and foreign income taxes payable - 393,781
Current portion of long-term debt 1,630,000 1,630,000
--------------- ---------------
Total current liabilities 3,961,830 4,822,777
Long-term liabilities:
Long-term debt 9,274,459 9,948,687
Pension and other benefits 118,230 410,080
Deferred income taxes 54,379 -
-------------- ---------------
9,447,068 10,358,767
Total liabilities 13,408,898 15,181,544
Stockholders' equity:
Common stock, $1 par value:
Authorized shares - 4,000,000
Issued shares - 2,508,626 in 2002, 2,504,526 in 2001
Outstanding shares - 1,992,146 in 2002,
2,043,046 in 2001 2,508,626 2,504,526
Other capital 446,011 496,708
Retained earnings 17,234,360 15,610,362
Treasury stock at cost (516,480 shares in 2002,
461,480 in 2001) (4,421,533) (3,816,533)
Accumulated other comprehensive loss (201,956) (241,187)
--------------- ---------------
Total stockholders' equity 15,565,508 14,553,876
--------------- ---------------
Total liabilities and stockholders' equity $ 28,974,406 $ 29,735,420
=============== ===============
See accompanying notes.
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Income
SIX MONTHS ENDED JUNE 30,
2002 2001
---- ----
Net sales $ 20,262,885 $ 17,942,511
Cost of products sold 13,972,004 12,738,951
--------------- ---------------
6,290,881 5,203,560
Selling, administrative and general expenses 3,457,183 2,918,896
--------------- ---------------
2,833,698 2,284,664
Interest income 42,797 88,126
Other (expense) income--net 132,125 185,967
Interest expense (353,162) (28,837)
--------------- ---------------
Income before income taxes 2,655,458 2,529,920
Income taxes 1,031,460 989,178
--------------- ---------------
Net Income $ 1,623,998 $ 1,540,742
--------------- ---------------
Earnings per share of common stock:
Basic $0.80 $0.75
=============== ===============
Diluted $0.79 $0.74
================ ===============
Dividends per share of common stock: $0.00 $0.00
================ ===============
See accompanying notes.
3
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Income
THREE MONTHS ENDED JUNE 30,
2002 2001
---- ----
Net sales $ 11,008,835 $ 9,825,943
Cost of products sold 7,576,067 7,034,726
--------------- ----------------
3,432,768 2,791,217
Selling, administrative and general expenses 1,965,794 1,470,928
--------------- ----------------
1,466,974 1,320,289
Interest income 18,645 32,117
Other (expense) income--net 69,131 107,564
Interest expense (172,827) (13,332)
-------------- ----------------
Income before income taxes 1,381,923 1,446,638
Income taxes 534,722 562,733
-------------- ----------------
Net Income $847,201 $883,905
=============== ================
Earnings per share of common stock:
Basic $0.42 $0.43
=============== ================
Diluted $0.42 $0.42
=============== ================
Dividends per share of common stock: $0.00 $0.00
=============== ================
See accompanying notes.
4
American Locker Group Incorporated and Subsidiaries
Consolidated Statements of Cash Flows
SIX MONTHS ENDED JUNE 30,
2002 2001
---- ----
OPERATING ACTIVITIES
Net income $ 1,623,998 $ 1,540,742
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 539,055 358,905
Deferred income taxes 127,772 -
Change in assets and liabilities:
Accounts and notes receivable (271,814) 206,579
Inventories 609,004 (727,038)
Prepaid expenses (79,013) (186,889)
Accounts payable and accrued expenses (217,166) (402,176)
Long-term pension and other benefits (291,850) (41,269)
Income taxes (507,270) (199,395)
------------- ---------------
Net cash provided by operating activities 1,532,716 549,459
INVESTING ACTIVITIES
Purchase of property, plant and equipment (131,137) (580,233)
------------- ---------------
Net cash used in investing activities (131,137) (580,233)
FINANCING ACTIVITIES
Debt repayment (674,228) (100,002)
Common stock purchased for treasury (605,000) (98,930)
Common stock purchased and retired (148,785) (4,147)
Proceeds from common stock issued 42,188 -
-------------- ----------------
New cash used in financing activities (1,385,825) (203,079)
Effect of exchange rate changes on cash 27,462 (12,855)
-------------- ----------------
Net increase (decrease) in cash 43,216 (246,708)
Cash and cash equivalents at beginning of period 4,579,034 3,696,359
-------------- ----------------
Cash and cash equivalents at end of period $4,622,250 $3,449,651
============== ================
See accompanying notes.
5
Notes to Consolidated Financial Statements
American Locker Group Incorporated and Subsidiaries
1. The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with accounting principles generally accepted
in the United States for interim financial information and with the
instructions to Form 10-Q. Accordingly, the condensed financial statements
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of the Company's management, all adjustments, consisting of normal
recurring accruals, considered necessary for a fair presentation of such
condensed financial statements have been included. Operating results for
the six month period ended June 30, 2002 are not necessarily indicative of
the results that may be expected for the year ended December 31, 2002.
For further information, refer to the Company's consolidated financial
statements and the footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 2001.
2. On July 6, 2001, the Company purchased 100% of the outstanding capital
stock of B.L.L. Corporation, d/b/a Security Manufacturing Corporation (SMC)
a privately held Texas corporation, and related real estate for
approximately $12,100,000 net of cash received. The purchase was financed
with long-term debt of approximately $11,900,000. Goodwill of approximately
$6,400,000 was initially recorded in connection with the acquisition,
during the second quarter of 2002, the parties agreed to a price adjustment
resulting in a $250,000 reduction of the purchase price. This adjustment
resulted in a decrease of $250,000 to the goodwill balance. See the
Company's Report on Form 8-K dated July 12, 2001, Report on Form 8-K/A
filed September 5, 2001, and Form 10-K for the year ended December 31, 2001
for more information regarding this acquisition. The operating results of
SMC have been included in the accompanying consolidated statements of
income for the three and six month periods ended June 30, 2002 and the
assets and liabilities of SMC are included in the accompanying consolidated
balance sheet at June 30, 2002 and December 31, 2001.
3. Provision for income taxes is based upon the estimated annual effective tax
rate.
4. Net income per common share is computed by dividing net income by the
weighted average number of shares outstanding, plus, when dilutive, the
common stock equivalents which would arise from the exercise of stock
options, during the periods. Basic and diluted weighted average shares
outstanding were 2,019,822 (2,058,977 in 2001) and 2,059,694 (2,081,272 in
2001) respectively for the six month period ending June 30, 2002.
5. During the quarter ended June 30, 2002, the Company paid $605,000 to
purchase 55,000 shares of the Company's common stock from the estate of its
former chairman and chief executive officer. These shares are recorded as
treasury stock at June 30, 2002. Additionally, during the second quarter of
2002, the Company's President and Chief Operating Officer
6
exercised stock options covering 15,000 shares of common stock, and
subsequent to the stock option exercise, the Company purchased and retired
10,900 of these shares for $148,785.
6. Inventories are valued at the lower of cost or market. Cost is determined
by using the last-in, first-out method for substantially all of the
inventories.
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JUNE 30, December 31,
2002 2001
Raw materials $2,473,884 $2,898,908
Work-in-process 1,889,222 2,373,549
Finished goods 2,263,228 1,962,881
----------- -----------
$6,626,334 $7,235,338
Less allowance to
reduce carrying
value to LIFO
basis (421,827) (421,827)
----------- -----------
$6,204,507 $6,813,511
=========== ===========
7. Total comprehensive income consisting of net income and foreign currency
translation adjustment was $1,663,229 and $1,527,887 for the six months
ended June 30, 2002 and June 30, 2001 respectively.
7
Item 2. Management Discussion and Analysis of Financial Condition
and Results of Operations
American Locker Group Incorporated and Subsidiaries
FIRST SIX MONTHS 2002 VS FIRST SIX MONTHS 2001
Sales for the first six months of 2002 of $20,263,000 increased $2,320,000 or
13% compared to sales of $17,943,000 during the same period in 2001. Plastic
locker sales to the United States Postal Service (USPS) totaled $11,652,000
during the first six months of 2002 compared to $11,940,000 during the same
period of 2001. Plastic Cluster Box Units (CBUs) sales were $11,196,000 in 2002
compared to $11,263,000 during the first half of 2001. The decrease in sales of
Plastic CBUs is the result of product mix as a lower priced Plastic CBU was
introduced in mid 2001, and price reductions of 3% to 5% that became effective
in April 2001 on existing Plastic CBU models. The price reductions were offset
by modest increases in the number of Plastic CBUs shipped in the first six
months of 2002 versus 2001. Sales of Outdoor Parcel Lockers (OPLs) were $456,000
in the first six months of 2002 compared to $677,000 in 2001. The decrease in
OPLs is the result of more USPS spending on Plastic CBUs. Sales of metal,
mechanical and electronic lockers, which includes the Company's luggage cart
business, were $8,611,000 for the first six months of 2002 compared to
$6,002,000 for the first six months of 2001. This increase of $2,609,000 or 44%
consists of sales of $3,831,000 made by the Company's new subsidiary, Security
Manufacturing Corporation (SMC), offset by a decrease from other products and
services most notably the luggage cart business at the Detroit Metropolitan
Airport, where sales decreased due to reduced air passenger volume and a decline
in locker sales to amusement parks as a result of current economic conditions.
The Company believes that the long-term outlook for CBU volume remains favorable
in light of the continued USPS commitment to the CBU program and its resulting
operating cost reduction benefits. As previously disclosed, total CBU demand is
influenced by a number of factors over which the Company has no control,
including but not limited to: USPS budgets, policies and financial performance,
domestic new housing starts, postal rate increases, and the weather as these
units are installed outdoors. The Company's share of the CBU market has
increased during 2001 and 2002, in part due to its acquisition of SMC, one of
its prior competitors. The Company believes its CBU product line, including the
acquired line of aluminum CBUs made by the Company's new subsidiary, SMC,
continues to represent the best value when all factors including price, quality
of design and construction, long-term durability and service are considered.
Cost of products sold as a percentage of sales was 69.0% during the first six
months of 2002 compared to 71.0% in the first six months of 2001. The
improvement in 2002 is due to higher margins obtained from SMC and stable
margins for other products.
Selling, general and administrative costs for the first six months of 2002
increased $538,000 over the same period in 2001. This increase is due primarily
to SMC expenses of $804,000 offset by a one time reduction of $319,000 as the
result of the reversal of a liability which existed under the Supplemental
Executive Retirement Plan due to the death in March of 2002 of the only current
beneficiary under the Plan. This one time reduction, which was recorded in the
8
first quarter of 2002, increased basic and diluted earnings per share by $.09
for the six months ended June 30, 2002. This item had no impact on basic and
diluted earnings per share for the three months ended June 30, 2002. Selling,
general and administrative expenses as a percentage of sales were 17.1% in 2002
compared to 16.3% in 2001.
Interest expense was $353,000 in 2002 compared to $29,000 in 2001. The increase
resulted form the Company's increased debt to finance the acquisition of SMC in
July 2001.
SECOND QUARTER 2002 VS SECOND QUARTER 2001
Second quarter sales were $11,009,000 in 2002, an increase of $1,183,000 from
the same period in 2001. The increase consisted of sales of $2,110,000 made by
SMC in 2002, this was offset by a reduction in sales of metal, mechanical and
electronic lockers, due to lower demand and volume across various markets
including the luggage cart business at Detroit Metropolitan Airport. Plastic
locker sales, consisting of CBUs and OPLs were $6,365,000 in 2002 versus
$6,324,000 in 2001.
Cost of products sold as a percentage of sales was 68.8% during the second
quarter of 2002, compared to 71.6% during the second quarter of 2001. The
improvement in 2002 is due to higher margins obtained from SMC and stable
margins for other products.
Selling, administrative and general expenses were 17.8% of net sales during the
second quarter of 2002 compared to 15.0% in the second quarter of 2001, as a
result of the additional SMC expenses.
Interest expense in the second quarter of 2002 of $173,000 increased from
$13,000 in the second quarter of 2000 due to the Company's increased debt to
finance the acquisition of SMC in July 2001.
LIQUIDITY AND SOURCES OF CAPITAL
The Company's liquidity is reflected in its current ratio and its working
capital. The current ratio, the ratio of current assets to current liabilities,
was 4.31 to 1 at June 30, 2002 and 3.55 to 1 at December 31, 2001, respectively.
Working capital, the excess of current assets over current liabilities, was
$13,128,000 at June 30, 2002, an increase of $819,000 over $12,309,000 at
December 31, 2001. Cash provided by operating activities was $1,533,000 during
the first six months of 2002, compared to $549,000 provided by operating
activities for the same period in 2001. The Company's $3,000,000 line of credit
is available to assist in satisfying future working capital needs, if required.
The Company anticipates that cash on hand and cash generated from operations in
2002 will be adequate to fund working capital needs, capital expenditures and
debt payments. However, if necessary, the Company has a $3,000,000 revolving
bank line-of-credit available to assist in satisfying future operating cash
needs. No amount is outstanding under the line of credit at June 30, 2002.
9
Effects of New Accounting Pronouncements
THE COMPANY ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS (SFAS) NO. 142,
GOODWILL AND OTHER INTANGIBLE ASSETS, ON JANUARY 1, 2002. DURING 2001, THE
COMPANY ADOPTED THE PROVISION OF SFAS NO. 142 WHICH PROHIBITED THE AMORTIZATION
OF GOODWILL ASSOCIATED WITH ACQUISITIONS MADE AFTER JUNE 30, 2001, IN CONNECTION
WITH ITS ACQUISITION OF SMC ON JULY 6, 2001. UNDER SFAS NO. 142, GOODWILL IS
REVIEWED FOR IMPAIRMENT AT LEAST ANNUALLY AT THE REPORTING UNIT LEVEL. IN
ACCORDANCE WITH SFAS NO. 142, THE COMPANY COMPLETED ITS TRANSITIONAL GOODWILL
IMPAIRMENT TEST EFFECTIVE JANUARY 1, 2002 AND NO IMPAIRMENT LOSS WAS NECESSARY.
THE COMPANY ADOPTED STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 144,
ACCOUNTING FOR THE IMPAIRMENT OR DISPOSAL OF LONG-LIVED ASSETS (SFAS NO. 144).
SFAS NO. 144 SUPERCEDES SFAS NO. 121, ACCOUNTING FOR THE IMPAIRMENT OF
LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF, BUT RETAINS ITS
FUNDAMENTAL PROVISIONS FOR RECOGNITION AND MEASUREMENT OF THE IMPAIRMENT OF
LONG-LIVED ASSETS TO BE HELD AND USED AND THOSE TO BE DISPOSED OF BY SALE. THERE
WAS NO IMPACT UPON ADOPTION OF SFAS NO. 144.
Safe Harbor Statement under the Private Securities Litigation Reform Act Of 1995
Forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties including without limitation the following: (i) the Company's
plans, strategies, objectives, expectations, and intentions are subject to
change at any time at the discretion of the Company, (ii) the Company's plans
and results of operations will be affected by the Company's ability to manage
its growth and inventory, and (iii) other risks and uncertainties indicated from
time to time in the Company's filings with the Securities and Exchange
Commission.
10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Amendment dated as of May 20, 2002 to Employment Agreement dated
November 18, 1999 between American Locker Group Incorporated and
Edward F. Ruttenberg
10.2 Second Amendment dated as of May 20, 2002 to Employment Agreement
dated November 18, 1999 between American Locker Group Incorporated and
Roy J. Glosser
99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002
99.2 Certification of Principal Accounting Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002
(b) The Company did not file any reports on Form 8-K during the three
months ended June 30, 2002.
11
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN LOCKER GROUP INCORPORATED
(Registrant)
/S/EDWARD F. RUTTENBERG
--------------------------------------
Edward F. Ruttenberg
Chairman and Chief Executive Officer
Date: August 12, 2002
12
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
- ----------- -----------
10.1 Amendment dated as of May 20, 2002 to Employment Agreement
dated November 18, 1999 between American Locker Group
Incorporated and Edward F. Ruttenberg
10.2 Second Amendment dated as of May 20, 2002 to Employment Agreement
dated November 18, 1999 between American Locker Group Incorporated
and Roy J. Glosser
99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certification of Principal Accounting Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
13
EXHIBIT 99.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with Amendment No. 1 to the Quarterly Report of American
Locker Group Incorporated (the "Company") on Form 10-Q/A for the quarterly
period ended June 30, 2002, as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), the undersigned, in the capacities and on the
date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his
knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the Company.
/S/EDWARD F. RUTTENBERG
----------------------------------------
Edward F. Ruttenberg
Chairman and Chief Executive Officer
Dated: August 12, 2002
14
EXHIBIT 99.2
CERTIFICATION OF PRINCIPAL ACCOUNTING OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with Amendment No. 1 to the Quarterly Report of American
Locker Group Incorporated (the "Company") on Form 10-Q/A for the quarterly
period ended June 30, 2002, as filed with the Securities and Exchange Commission
on the date hereof (the "Report"), the undersigned, in the capacities and on the
date indicated below, hereby certifies pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his
knowledge:
1. The Report fully complies with the requirements of Section 13(a) or 15(d) of
the Securities Exchange Act of 1934; and
2. The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operation of the Company.
/S/WAYNE L. NELSON
-----------------------------------
Wayne L. Nelson
Principal Accounting Officer
and Assistant Secretary
Dated: August 12, 2002
15